With big fanfare but little surprise, T-Mobile USA Inc. announced it would begin deploying UMTS technology across its network beginning early next year. The move follows the recent completion of the Federal Communications Commission’s advanced wireless services auction that saw T-Mobile USA plunk down $4.2 billion for new spectrum.
T-Mobile USA said it plans to spend around $2.6 billion installing UMTS technology across its network during the next three years and that it has been working with equipment vendors and handset manufacturers for months prior to the auction to get to market as quickly as possible. Commercial rollouts are expected to begin in mid-2007 and be complete by 2009. The carrier said it already has rolled out about half of the necessary UMTS equipment for New York.
However, T-Mobile USA did not announce definitive plans to launch the higher-speed HSDPA enhancement for its UMTS service, only noting that the network would be “HSDPA-ready.” Cingular Wireless L.L.C. is launching both UMTS and HSDPA technology across its network and plans to have most major markets covered by early next year. HSDPA is a software upgrade to UMTS that allows for higher downlink speeds.
Industry watchers had expected T-Mobile USA to bid aggressively in the AWS auction—the carrier spent more on spectrum than any other bidder—and to use that spectrum to launch a 3G network. T-Mobile USA essentially doubled its spectrum capacity in the top 100 U.S. markets, company executives said at a New York press conference. Analysts noted that T-Mobile USA now controls an average of 52 megahertz of spectrum across most major markets, which is on par with its larger competitors.
“The acquisition of additional spectrum is an important step forward for us. Not just for T-Mobile USA but for the Deutsche Telekom Group, which benefits from the growth of its U.S. business. We are aiming to maximize revenue market share and make T-Mobile USA the largest single company within the group,” said Kai-Uwe Ricke, chief executive officer of Deutsche Telekom AG, T-Mobile USA’s parent company.
T-Mobile USA accounted for 22 percent of DT’s overall revenues in the first half of this year, up from 16 percent in 2004. DT has plans to increase that percentage even more, to about 25 percent of revenues by 2010.
“We have newly acquired spectrum and have now a more solid basis on which to build further growth in the U.S. mobile business,” said Uwe-Ricke. On the spectrum expense, he added that “I’m convinced that this is money well spent. The U.S. plays an important role in assuring the future of Deutsche Telekom’s group.”
T-Mobile USA plans to release third-quarter financials Nov. 9, and execs promised that more details would be available then. Uwe-Ricke also said that despite a dip in T-Mobile USA’s growth in the second quarter due to a move from one-year to two-year contracts, the carrier “had quickly returned to the sort of growth we’ve seen before.”
The carrier estimated its total capital expenditures for the next three year will be just under $9 billion—substantially less than analysts had expected, company execs pointed out.
“The reason it’s cheaper for us is, we’re going to be able to deploy 3G right on the … footprint we have today,” said Robert Dotson, CEO of T-Mobile USA. He said that since the size of UMTS equipment has decreased, T-Mobile USA will be able to utilize most of its existing sites. And, he noted, the cost of UMTS equipment and handsets have come down as T-Mobile USA watched other U.S. carriers roll out their advanced networks.
“I would be shocked if any other company has anything close in terms of cost of deployment and cost of equipment,” Dotson said.
T-Mobile USA is gaining that cost advantage at the expense of market timing as its larger competitors, Cingular, Verizon Wireless and Sprint Nextel Corp., have begun deploying high-speed upgrades to their networks.
Dotson noted that unlike its competitors, T-Mobile USA was focused on “taking existing habits into the mobile environment,” such as social networking, user-generated content and e-mail for the mass wireless market. The company also would not “pour resources” into mobile TV for its current deployment, he added.
Another major participant in the spectrum auction, the cable operators’ joint venture with Sprint Nextel Corp., said last week that they have not completed plans for their spectrum, but that the purchase gives them “many options and significant flexibility.” They did add, however, that they “did not approach this investment with the intent of becoming the nation’s fifth wireless voice provider, but to obtain greater flexibility in developing options for more advanced wireless services.”
The cable companies also noted that the spectrum could be used in conjunction with their other joint venture with Sprint Nextel, which is supposed to begin launching converged products in seven markets by the end of the year.
